Exporting oil and gas does not create energy independence, electrification does.

Sam Calisch

Sam Calisch

Rewiring America
  • Even though the U.S. now exports more oil and gas than it imports (often called “energy independence”), we remain very dependent on world energy markets, buying and selling fossil fuels at prices we don’t control.

  • There are technical, economic, and political reasons for this, but the result is the same: global fossil fuel price volatility exposes everyday Americans to economic hardship, a fact laid bare by the 2022 invasion of Ukraine.

  • There is, however, a path to true energy independence: full electrification powered by renewable energy. This not only results in low, stable energy prices, but also combats the existential threat of climate change.


In 2019, the U.S. became a net exporter of energy for the first time in nearly 70 years [1]. In other words, it sold more oil and gas to other countries than it bought from them. This shift was largely driven by the shale revolution, where hydraulic fracturing (“fracking”) and horizontal drilling enabled access to previously unreachable oil and gas deposits [2] and the adoption of liquefied natural gas (LNG) export facilities, which allowed gas to be shipped around the world just like oil [3].

Much has been said about how being a net exporter of energy establishes the U.S. as “energy independent,” theoretically making it immune to changes in supply and demand of energy across the world. As the argument goes, if geopolitical events upset global energy markets, the U.S. can keep energy affordable by using its own production to meet domestic demand [4].

This argument is flawed in several ways.

The first flaw is that fossil fuels are commodities traded on global markets and exposed to global prices. Because of this, even now, as a net exporter of energy, the U.S. does not get to set prices for fuels.

These prices fluctuate based on global events, and the U.S. is forced to handle the resulting volatility.

Second, for technical reasons we cannot just use our own oil and gas exclusively. In the case of oil, this is because crude oil (what comes out of the ground) is not used directly; it must first be refined into gasoline, diesel, kerosene, distillates, and other products by selling crude oil to a vast network of refineries across the globe. Further, not all crude oil is the same. U.S. refineries are mostly set up to process “heavy” crude oils, but our domestically produced crude tends to be “light” [5]. Because of this, the U.S. imports a substantial amount of heavier crude oil to operate the domestic refinery fleet economically.

In the gas market, many regions of the country lack sufficient infrastructure to transport and store natural gas, and hence must rely on imports, typically liquefied natural gas (LNG), to meet demand. For instance, New England lacks any gas production or storage facilities, and is isolated from domestic LNG supply by Jones Act shipping restrictions [6]. Hence, when demand outstrips supply in the winter heating season, international LNG imports are the region’s only option to keep households’ gas furnaces and water heaters running [7]. Thus, despite being the world’s largest natural gas producer, the U.S. still must import significant quantities of natural gas [8].

Net Exporter Graph

Figure 1: Seasonally-adjusted energy price changes versus 5 year average values. Data from BLS Data Series APU000072511, APU00007471A, APU000072620, and APU000072610.

The third flaw in the argument is that it ignores how volatility in the global price of fossil fuels hits everyday Americans. The households depending on gasoline-powered cars to get to work and gas furnaces to stay warm have no recourse when energy prices go up. The small businesses struggling to keep their doors open must pay their bills, even when they rise unexpectedly. Meanwhile fossil fuel companies rake in record profits as their products are suddenly more valuable, and those who depend on them will continue to pay, despite the high prices. In these times, the government steps in to set domestic and international policies to alleviate hardships on those affected [9]. This mechanism is yet another reason the U.S. is not “independent” from the global energy markets, despite being a net exporter.

The destabilization of energy markets following the 2022 invasion of Ukraine by Russia has laid these forces bare [10]. The price of gasoline, required to get Americans to work every day, has risen by 54 percent over the last year, representing an additional $800 of annual spending for the average household [11]. Prices of heating oil, used for space and water heating by over seven million American households [12], rose by 72 percent over the last year, representing an additional $960 of annual spending for the average household [13].

Fortunately, there is a path to true American energy independence: electrification.

Using electricity is cheaper and less volatile than using fossil fuels. As an example, see Figure 1, showing price changes over the last year of common fuels compared to their five year average price [14]. As we have seen, prices for fossil fuels have risen rapidly over the past year, especially in 2022. In contrast, electricity prices have remained relatively low and stable, rising roughly three times less than even natural gas, the fossil fuel often touted as affordable [15]. Why is this?

First, electricity markets are inherently local, not global [16]. Today, the average distance between households and the nearest major electricity generation facility is just 5 miles [17]. If that electricity comes from a rooftop or community solar project, this distance is even less. Long distance transmission lines do move electricity around the U.S., but major international trade is not possible. In contrast to fossil fuels, dollars spent on electricity largely stay inside the U.S., if not within your community [18].

Second, the price of electricity produced by cheap renewables like wind and solar is inherently stable. Because the wind and sun are free, the cost of this renewable electricity is largely set by taking the upfront costs to build the solar or wind farm and simply spreading them out over the 20-30 year lifetime [19]. Without unpredictable fuel prices, wind and solar can provide stable, low cost electricity and protect consumers from energy price shocks. Today, the price of electricity still exhibits some volatility because fossil fuels are used to power a portion of the grid. This volatility is diluted, however, by the financed cost of power plant capital equipment, as well as the portion of electricity supplied by renewables. Over the past year, however, 17 states got the majority of their electricity from stable, clean sources [20]. As this number continues to grow, the price of electricity will become even more stable.

As we have seen, the notion that exporting oil and gas makes the U.S. energy independent is not true, and current trends make this clear. In contrast, electrification really is a path to true energy independence, combating not only the burden of rising fuel prices but also the worst effects of climate change. The U.S. should double down on clean energy technologies and electrification investments today. We have the technology we need today to be energy independent, and electrifying everything is the key.



[1] In the 1950s, the U.S. imported only about 2 Quads of energy (quadrillion British thermal units), while exporting approximately the same amount. Both amounts were small compared to the roughly 30-40 Quads of energy that were produced and consumed domestically. Over the next 20 years, consumption approximately doubled, while production grew more slowly. As a result, imports grew by roughly ten times, while exports remained roughly the same. This state of being a net energy importer remained true until 2019, when the rapid rise in domestic production fueled by the shale revolution reached a point when exports surpassed imports. See the EIA’s Monthly Energy Review.

[2] Widespread use of fracking and horizontal drilling have increased access to previously-unreachable oil and gas formations, and are largely responsible for the dramatic rise in U.S. energy production in the last ten years (See the EIA’s SEDS Data). The use of these techniques has also had significant negative effects, including groundwater and soil contamination, methane pollution, fracking-induced earthquakes, and a host of public health risks. See Natural Gas Operations From a Public Health Perspective, Methane and the greenhouse-gas footprint of natural gas from shale formations, Human health risk assessment of air emissions from development of unconventional natural gas resources. For a good discussion of the shale revolution and U.S. energy policy, see the IEA’s Energy Policies of IEA Countries: United States 2019 Review.

[3] Liquefied natural gas (LNG) is a way to ship gas in much the same way we ship oil. The key to this is cooling the gas down to -260 degrees Fahrenheit, at which point it becomes a liquid, and has a volume roughly 600 times smaller than when it was a gas at standard pressure and room temperature. This shrink is key to fitting enough gas on a ship to be economically feasible. Between 2015 and 2020, the amount of LNG exports from the U.S. increased by approximately ten times. Critically, this liquefaction process takes a good deal of energy – the EIA estimates that 15-18% of the gas transported as LNG is consumed by the process requirements. See Natural gas explained: Liquefied natural gas, U.S. EIA and Liquefied Natural Gas (LNG), Office of Fossil Energy and Carbon Management, U.S. DOE

[4] The notion of energy independence largely dates to the 1970s, when the U.S. became a net oil importer, and an oil embargo was placed against the U.S. in retaliation for actions taken in the 1973 Arab-Israeli War. President Nixon created “Project Independence,” a plan to eliminate imports of foreign oil (a good historical timeline is given in Energy Independence: A Short History). The U.S. then passed the Energy Policy and Conservation Act (EPCA) in 1975, which created the Strategic Petroleum Reserve and the first fuel economy targets for automobiles. The EPCA also included the Crude Oil Export Ban, which eliminated nearly all exports of domestic oil.

In 2015, after 40 years in effect, the ban was repealed in the Consolidated Appropriations Act of 2016. Despite this, after the ban was lifted U.S. oil imports remained largely unchanged. See the EIA’s US Imports of Crude Oil and Petroleum Products for data, and the GAO’s Effects of the Repeal of the Crude Oil Export Ban for discussion.

[5] The “heavy” and “light” designations refer to the oil density, as measured by API gravity, named after the American Petroleum Institute. A light oil has a high API gravity (>31), while heavy oils have low API gravity (<22). The shale formations associated with the increase in U.S. domestic production generally contain light crude oils (see the EIA’s Crude Oil and Lease Condensate Production by API Gravity, Percentages of Total Imported Crude Oil by API Gravity, and Today in Energy: August 23, 2019). Another important parameter of crude oil is sulfur content. Low sulfur content oils are called “sweet”, while higher sulfur content is called “sour”.

[6] The Merchant Marine Act of 1920 (also known as the Jones Act) is a major U.S. statute pertaining to commercial maritime shipping, put in place after World War I to build the domestic shipping industry. The statute states that any ship moving goods from one domestic port to another must be built, owned, and operated by American citizens or permanent residents. A vessel meeting the requirements of the statute is often called Jones-Act-compliant.

There are currently no Jones-Act-compliant LNG tankers capable of transporting bulk quantities of LNG. According to the CATO Institute, as of 2019 there were only two compliant barges, but barges differ from tankers in that they carry significantly less LNG (40-70x less in this case), and are meant for refueling other vessels running on LNG rather than transporting large quantities of LNG to port. Shell and Crowley recently announced building the largest Jones-Act-compliant LNG barge to date, set to be placed in service in 2024, but its capacity is still about 15x less than a common tanker size, and is slated to be used for refueling other ships. The lack of compliant tanker vessels is largely driven by the high cost of building in American shipyards. Industry experts estimate building a Jones-Act compliant LNG tanker would cost approximately $500 million, about three times more than building the same vessel in an Asian shipyard. The Jones Act has accumulated considerable political support (including Senator Mitch McConnell), and any changes to it would face a considerable uphill battle.

[7] The EIA’s New England Dashboard contains detailed information on the region’s natural gas infrastructure, including LNG terminals. The Natural Gas Weekly Update contains data on overall U.S. deliveries by LNG tanker and pipeline, as well as the state of national storage facilities. The Underground Natural Gas Working Storage Capacity reports that natural gas storage capacity was essentially unchanged during 2020. The 2021 article, The Role of Liquefied Natural Gas in the US Gas Market, contains a discussion of LNG and the constraints in New England.

[8] Data on natural gas production by country are available from the EIA here. Data on U.S. natural gas import quantities are available from the EIA here.

[9] A poignant example is the recent and unprecedented release of one million additional barrels per day from the U.S. strategic reserve. See FACT SHEET: President Biden's Plan to Respond to Putin's Price Hike at the Pump | The White House.

[10] The dramatic rise in fossil fuel prices during the last six months are the combination of two major events. First, extreme weather and supply chain shortages disrupted production during the summer of 2021. This led to historically low levels of gas in storage reservoirs leading into the winter. (See the IEA’s What is behind soaring energy prices and what happens next? and Rewiring America’s Energy Bill Security for American Households Through Electrification). Then, in February 2022, Russia’s invasion of Ukraine sent prices still higher, as many countries moved to stop importing oil from Russia.

[11] Gasoline price data is available from the Bureau of Labor Statistics (BLS) as series APU00007471A. Annual household spending on gasoline ($1,447) is available in the BLS Consumer Expenditure Survey. For the lowest income decile, over 11% of pretax income goes to gasoline. With price increases, this rises to 18%. See Table 1110. Deciles of income before taxes: Annual expenditure means, shares, standard errors, and coefficients of variation, Consumer Expenditure Surveys, 2020.

[12] The U.S. Census Bureau’s American Housing Survey finds that approximately 7.3 million households use fuel oil for space or water heating, and that 5.7 million of these use it as their primary fuel. The EIA estimates more conservatively; according to the March 2022 Short Term Energy Outlook Table WF01, 5.3 million households use fuel oil as their main heating fuel. Together these households consume approximately 3 billion gallons per year of fuel oil for residential space and water heating, according to the EIA’s Fuel Oil and Kerosene Sales Report. This is the highest consumption of distillate oil (the class of products including diesel and fuel oil) after use on roads and farms.

[13] Fuel oil price data is available from the Bureau of Labor Statistics (BLS) as series APU000072511. Annual household spending on fuel oil ($1,328) is available in the Energy Information Administration’s Short Term Energy Outlook Table WF01.

[14] Data from BLS Data Series APU000072511, APU00007471A, APU000072620, and APU000072610. Propane prices are not included as a series by the BLS, but are available from the EIA here, though only for six months of the year.

[15] Clearly, a large number of electric power plants run on fossil fuels, and hence are impacted by global markets, but this only represents a small component of the price seen by the end consumer, and hence the volatility is reduced.

[16] Of the annual U.S. electricity demand, just 1% is imported, almost exclusively from Canada to states just across the border. The EIA International Electricity data contains year-over-year electricity imports, showing the U.S. imports approximately 60 billion kWh per year, almost exclusively from Canada.

[17] This value is calculated based on the EIA’s location data for all generating facilities in the U.S., available from the EIA’s Form EIA-860 detailed data with previous form data (EIA-860A/860B) and visualized in the Electricity Data Browser. For every census tract in the U.S., we calculate the distance from the tract centroid to the closest generating facility, and then compute a population-weighted average over all census tracts using data from the Census Bureau’s Population and Housing Unit Estimates Datasets.

[18] For a discussion of where money spent on gasoline goes, see the Union of Concerned Scientists’ Where Your Gas Money Goes and the EIA’s Gasoline Pump Components History.

Critics of electrification may object that dollars spent on capital upgrades like solar and electric vehicles are destined for overseas because the panels and batteries are manufactured abroad. These hardware costs, however, are only a small portion of the cost of these goods. For instance, according to NREL’s US Solar Photovoltaic System and Energy Storage Cost Benchmarks: Q1 2021, panels were just 13% of the cost of a residential photovoltaic system. The largest portions of the remainder are domestic expenditures like sales and marketing, installer profit and overhead, and various balance-of-system components. In the case of EVs, according to the International Council on Clean Transportation’s Update on electric vehicle costs in the United States through 2030, battery costs are approximately one-third of vehicle costs.

[19] This is called the “levelized cost of electricity” (LCOE). The financial management firm Lazard regularly publishes its data on LCOE, and NREL regularly publishes up-to-date analysis. Besides the upfront capital costs of a solar or wind farm, there are additional operations and maintenance (O&M) costs. These have very minor impact on the price of renewable electricity because they make up just 1.5% of the solar LCOE according to NREL’s 2021 Solar Benchmark and 4% of wind LCOE according to NREL’s 2020 Cost of Wind Energy Review. Further, these costs themselves are quite stable, as they consist of line items like regular solar panel cleaning, vegetation trimming, inspection, property taxes, and insurance payments.

[20] Monthly net electricity generation by source by state is available from the EIA here. The 17 states with more than half of their generation from clean sources from 2021 to 2022 are CA, IA, ID, IL, KS, ME, MN, MT, NH, NJ, NY, OR, SC, SD, TN, VT, WA. Further, 33 states obtained over a third of their generation from clean sources.